Online Lender Says It Won’t Rely on Peer-to-Peer Loans This Year

Nasdaq-listed online lender Lexin said it will not rely on its P2P business for growth in 2019. Photo: IC

Nasdaq-listed online lender Lexin said it will not rely on its peer-to-peer (P2P) lending business for growth in 2019, but rather its cooperation with financial institutions.

The online lender’s decision to deemphasize P2P lending a little more than a year after it went public marks the latest sign the government isn’t easing off China’s imploding online lending industry.

“Our plan in 2019 is to not rely on P2P for growth,” Lexin CEO Jay Xiao said on a conference call Thursday through a translator. “Since the end of last year, in accordance with the regulators’ wishes, we stopped the growth of the balances on our P2P,” he said, adding that the company is prepared to have all the growth this year being driven from funding partnerships with financial institutions. It now has more than 100 institutional partners.

In the fourth quarter of 2018, LexinFintech Holdings Ltd. received approximately 34% of its funding for new loans from its P2P lending platform Juzi Licai and 66% of the funding from institutional partners, Lexin Chief Financial Officer Craig Zeng said on the conference call.

China’s banking regulators have been putting plenty of effort into cleaning up illegal P2P platforms. One local banking regulator has also restricted local banks from providing clients outside the province with online loans issued via third parties, and stipulated that banks cannot outsource essential credit review and risk management procedures.

“Unlike many other companies, we do have a guarantee license, so we can give guarantees if that’s what our institutional partners desire,” said Xiao, adding that the company has multiple ways to work with banks. Some banks may require guarantee companies to bear the credit costs and the risk, but some may prefer to bear the creditor risk by themselves.

“In the near future, we’re probably a little bit more partial to having our institutional funding partners taking on the full risk,” Xiao said.

Lexin’s operating revenue rose 36% to 7.6 billion yuan ($1.13 billion) in 2018, and its net income surged to nearly 2 billion yuan from 240 million yuan, according to its 2018 annual report.

Its revenue growth last year came chiefly from the increase in financial services income, driven by the growing number of active customers and the average total outstanding principal balance of loans both on and off its balance sheet, the report said. The change of accounting policy also contributed to the growth.

In 2018, the company originated 66.1 billion yuan in loans, an increase of 38.5%, according to the report.